Coalition Puts Trust Tax Fight at Heart of Australia’s Small Business Pitch
Synopsis
Shadow Small Business Minister Jacinta Nampijinpa Price says Labor's proposed 30% minimum tax on discretionary trusts threatens the backbone of Australian small business, from tradies and retailers to professional firms and family businesses, by increasing tax bills or forcing costly restructures before its planned 2028 rollout.
Small business taxation reforms have been thrown under the microscope again, following the Coalition's decision to step up its opposition to the federal government's proposal to impose a minimum tax on discretionary trust income from 1 July 2028.
The policy has been criticised by business and accounting groups because they believe it would have an adverse effect on businesses where the family structure includes discretionary trusts.
Shadow Minister for Small Business Jacinta Nampijinpa Price said the proposal would impact a wide range of small businesses, such as the trades, retailers, agricultural businesses and professional service providers. She said many business owners may find themselves with increased tax bills or needing to make costly business restructures by the proposed start date.
Small Business Groups Challenge Proposal
Those concerns have been voiced by industry organisations. CPA Australia has urged a review of the proposed minimum tax, stating it would impose further compliance and restructuring costs on businesses that have been set up as discretionary trusts.
The accounting body has also expressed its concerns about the possibility of businesses being affected by state-based stamp duties costs if suitable relief measures are not put in place if they change their structural makeup.
Small business owners Association (COSBOA) comments that discretionary trusts are used for legitimate business purposes such as succession planning, asset protection and business continuity.
The reforms will affect up to 400,000 Australian small businesses if implemented, and the restructuring costs will vary from $15,000 to $50,000 depending on the complexity of the business.
As of the end of June 2024, over 2.66 million businesses were actively trading in Australia, with over 97% being small businesses, according to the Australian Bureau of Statistics (ABS). Because of the prevalence of small business, any important changes in business taxation have far-reaching economic consequences.
Trust Tax Reform Moves Into Political Spotlight
The Federal Government has announced that it is proposing to increase fairness in the tax system by ensuring that the taxation of discretionary trust income is made more similar to the taxation of employment income. Trustees would be taxed at the rate of 30% minimum rate, with credits for any taxes paid to beneficiaries.
The proposal is part of a broader, international discussion on trust taxation. New Zealand's trust tax rate was increased from 33% to 39% in April 2024 to bring it into line with the highest personal income tax rate, and in recent years the Canadian and UK trust reporting and anti-avoidance regimes have been tightened.
The difference between Australia's proposal and the other is that they impose a minimum tax on discretionary trusts, not a general rise in tax rates for trusts.
Treasury has published consultation papers on the reforms and is yet to introduce legislation. The implementation date is still 1 July 2028, and work is ongoing on the detailed design of the framework.
Source: Smart Company
Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
